Homebuyer Credit Expanded and Extended-
Great News for Today's Home Buyer!
Updated Nov. 24, 2009
If you thought time had run out to take advantage of the Federal Tax Credit, you're in luck, it's been extended!
Key points
The Worker, Home ownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time home buyer credit allowed by previous Acts.
Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
The new law also:
- Authorizes the credit for long-time homeowners buying a replacement principal residence.
- Raises the income limitations for homeowners claiming the credit.
Eligibility Requirements
You must be a first-time home buyer. Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time home buyers.
Long-time homeowners who buy a replacement home after Nov. 6, 2009 or in early 2010 can also qualify. Under this rule, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residenceDependents are not eligible to claim the credit.
No credit is available if the purchase price of a home is more than $800,000.
A purchaser must be at least 18 years of age on the date of purchase.
Your home must be located in the United States and you may not be a nonresident alien.
Your property must not be acquired from a related person (see IRS rules for details)
The property must not be acquired by gift or inheritance
You must not dispose of the property (or the property may not cease to be your principal residence or that of your spouse) before the end of the taxable year.You must buy the home after April 8, 2008 (although homes purchased in 2008 will need to repay the credit over a 15 year period), and before May. 1, 2010 (with closing to take place before July 1, 2010), to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.
Income limits
For purchases on or before Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less.
Details
For homes purchased between January 1 2009 and April 30, 2010:
If the homeowner owns and occupies the property for 36 months no repayment of the tax credit is required. If the buyer occupies the property for less than 36 months, the credit must be repaid. This is done by including the credit as an additional tax on the return for the year the home ceases to be the primary residence.
For 2008 Home Purchases:
The Housing and Economic Recovery Act of 2008 established a tax credit for first-time home buyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year. See IRS website for more details.
The maximum tax credit for an individual fist-time home buyer is 10% of the purchase price, not to exceed $8,000, and only half that amount if you are married filing separately. First time buyers may receive a refundable tax credit up to $8,000 for purchasing a principal residence in the US. If you make an eligible purchase in 2008, you claim the first-time home buyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return. For an eligible purchase in 2010, you can choose to claim the credit on either your 2009 or 2010 return.
To learn more, visit the Internal Revenue Service's first-time home buyer credit page and of course, consult with your accountant or CPA for how this will work on your tax return.
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